What is an offering memorandum in real estate?

It is the marketing document a broker prepares to sell a commercial property, often called an OM. It usually covers the property, its financials, the tenants and the market, and is often released after a buyer signs a confidentiality agreement.

What does OM stand for in real estate?

OM stands for offering memorandum. You may also hear it called an offering memo or, in some deals, a confidential information memorandum.

Are the numbers in an OM reliable?

Treat them as the seller's case, not as verified facts. OMs usually carry a disclaimer saying so. Check them against the T12, rent roll, leases and your own diligence.

Is an offering memorandum the same as a private placement memorandum?

No. A real estate OM markets a property to buyers. A private placement memorandum is a securities disclosure document given to investors in an offering. If you are raising capital, ask counsel what you need.

Why is the cap rate in the OM different from my number?

Usually because the NOI differs. The OM may use Year 1 pro forma NOI, adjusted NOI or a stabilized figure, while you use the T12. Ask which NOI and which price the stated cap rate uses.

Are my numbers uploaded when I use this checker?

No. The checker runs in your browser, and your numbers are not sent to Pacific Software Ventures or saved. It has no sign-up. Its site analytics do not record what you type.

Free tool and guide

What is an offering memorandum? and how to test one

An OM is how a property gets sold, so it makes the seller's case. Enter its numbers beside the T12 in the free checker below, and see the real cap rate and the questions to ask the broker.

Use the OM checker Read the guide

An offering memorandum, or OM, is the marketing document a broker prepares to sell a commercial property. It describes the property, its financials, tenants and market. It is a sales document and not a verified record, so the numbers to rely on come from the T12, the rent roll and the leases.

OM checker

Enter what the OM states and what the T12 shows, to compare cap rates, measure the NOI gap, and get the questions to ask the broker. It runs in your browser: your numbers are not uploaded, saved or tracked, and there is no sign-up.

Showing an invented sample deal

Cap rate on stated NOI: 6.0%
Cap rate on T12 NOI: 5.3%
Cap rate on pro forma: 6.0%
Price per unit: $204,167
OM NOI above the T12: $68,480; 13.2% of T12 NOI
T12 NOI at the stated cap: $8,658,667; Asking price is $1,141,333 away from this

What to ask the broker

On the T12, the cap rate at this price is 5.3%, against the 6.0% stated. Ask what the stated figure assumes that has not happened yet.
The OM's NOI is $68,480 above the T12, or 13.2%. Ask for the line-by-line bridge from one to the other.
The pro forma cuts expenses by $15,680 from the T12. Ask which lines fall, and why they would.

Flags come from arithmetic, and the percentage prompts are ours, not market norms. A flag is a question to ask, not a verdict on the deal.

What is in an offering memorandum

Formats vary by broker and property type, but most OMs follow a similar outline. If you are writing one, it also works as a template:

Executive summary: the offer, price guidance and investment highlights.
Property overview: location, size, age, condition and photos.
Financials: in-place income and expenses, a pro forma, and often a rent roll summary.
Tenant or unit information: who occupies the property, and on what terms.
Market overview: demographics, supply and employers.
Comparables: rent and sale comps that support the pricing.
Disclaimer: what the broker and seller do not promise. Read it.

How to analyze an OM, in order

Start with the numbers, not the story. Go to the financials before the highlights.
Find out which NOI is which. In-place, Year 1, stabilized and pro forma NOI are different numbers, and an OM can use several.
Recompute the cap rate. Divide the T12 NOI by the asking price, and compare it with the stated cap rate.
Ask for the bridge. Every dollar between the T12 and the pro forma should trace to a specific assumption.
Test the comps. Ask why these comps were chosen, and look for the ones left out.

What to check each claim against

The OM says	Check it against
Cap rate	Which NOI and which price it uses. Recompute it on the T12.
Pro forma rents	The rent roll and signed leases. How much is in place, and how much is assumed?
Pro forma expenses	The T12, line by line. Taxes after sale, insurance and management especially.
Occupancy	The rent roll, and who is actually paying.
Rent and sale comps	Whether they are truly comparable: age, location, date and concessions.
Capital spent	Invoices and the capital ledger, and what is still deferred.
Market story	A source you chose yourself, not only the one in the OM.

For the T12 side of this, paste the statement into the T12 analyzer, then bring its totals back here.

Where OMs mislead

A cap rate on a future NOI. Price set on next year's income means you pay today for growth that has not happened.
Taxes held at today's bill. A sale can trigger a reassessment in many places. Check how yours works.
Expenses that fall. A pro forma that cuts costs should say which, and why.
Upside with no cost. Higher rents after renovation need the renovation budget and the downtime too.
Flattering comps. Newer buildings, better streets and older dates can all raise a market rent.

Using AI to read an OM

An AI assistant can pull an OM's numbers and assumptions in minutes, as long as it cites the page for each, so you can check it. Many OMs arrive under a confidentiality agreement, so check it and your plan's data terms before uploading: see is AI safe for CRE deal documents? Here is a prompt to start with:

Review this offering memorandum.
List each stated NOI and cap rate, with its page.
Tell me which figures are actual and which are projections.
If a value is unclear, say so.

To go further, the Claude underwriting workflow covers the OM with the T-12 and rent roll, and the CRE AI Institute's free lesson shows how the training works.

Frequently asked

What is an offering memorandum in real estate?: It is the marketing document a broker prepares to sell a commercial property, often called an OM. It usually covers the property, its financials, the tenants and the market, and is often released after a buyer signs a confidentiality agreement.
What does OM stand for in real estate?: OM stands for offering memorandum. You may also hear it called an offering memo or, in some deals, a confidential information memorandum.
Are the numbers in an OM reliable?: Treat them as the seller's case, not as verified facts. OMs usually carry a disclaimer saying so. Check them against the T12, rent roll, leases and your own diligence.
Is an offering memorandum the same as a private placement memorandum?: No. A real estate OM markets a property to buyers. A private placement memorandum is a securities disclosure document given to investors in an offering. If you are raising capital, ask counsel what you need.
Why is the cap rate in the OM different from my number?: Usually because the NOI differs. The OM may use Year 1 pro forma NOI, adjusted NOI or a stabilized figure, while you use the T12. Ask which NOI and which price the stated cap rate uses.
Are my numbers uploaded when I use this checker?: No. The checker runs in your browser, and your numbers are not sent to Pacific Software Ventures or saved. It has no sign-up. Its site analytics do not record what you type.

Pacific Software Ventures built this tool and guide, and sells AI consulting and training to commercial real estate firms. This is general education, not investment, legal or tax advice.

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